Example business: a small installation company delivering a fixed-scope job. Sample amounts use one currency and exclude tax; overhead and financing need separate consideration.
1. What the process covers
Project costing compares the resources a job was expected to use with what it actually used. Begin with the agreed scope and define which costs belong to the job. A fixed customer price does not mean the delivery cost will stay fixed.
Keep selling prices separate from internal costs. An hour billed to a customer can have a different amount from the employee cost used in a project report. Decide how staff time, purchased materials, travel, and subcontractors will be recorded.
2. People and records to keep
On small screens, scroll the table sideways to see every column.
| Record | Who uses it | What to keep |
|---|---|---|
| Accepted scope and price | Sales and project lead | Deliverables, exclusions, acceptance, agreed price, and payment milestones. |
| Cost budget | Project lead | Planned hours, internal rates, materials, outside work, and contingency if used. |
| Actual work and cost | Staff, buyer, and finance | Time entries, material usage, expenses, and supplier costs with job references. |
| Change and handover | Project lead and customer | Requested change, impact, approval, completion, and outstanding issues. |
3. The everyday workflow
- Agree the scope. Write down what the customer will receive and how completion will be checked.
- Prepare the delivery budget. Estimate the required hours, materials, and outside costs.
- Record work as it happens. Connect time, purchases, and expenses to the job.
- Review remaining work. Compare actual costs and expected remaining costs with the budget.
- Approve changes and close. Confirm any changed price or deadline, finish the handover, and check final costs and billing.
4. A small business example
A sample job has an agreed price of 1,000. Recorded direct costs are 500 of labor, 150 of materials, and 50 of other agreed job costs. Total direct cost is 700, leaving 300 toward overhead and profit.
That 300 is not automatically net profit or cash in the bank. General business overhead, tax, financing, and payment collection may still matter. If more work is needed, include its expected cost in the forecast instead of reporting only what has been spent so far.
5. Checks and common problems
- Late time entries can make an active job look cheaper than it really is.
- Include ordered materials and subcontract work that remain to be billed when reviewing the expected final cost.
- A customer request is not automatically an approved paid change. Record its scope, price, and timing agreement.
- Do not confuse an invoice sent with cash collected or a project accepted with every cost recorded.
- Make sure all staff use the correct project reference and the agreed internal costing method.
6. Start with a simple system
Start with a project sheet containing scope, budget, actual costs, remaining work, and approved changes. An application can connect timesheets, expenses, purchases, tasks, and invoices without asking staff to enter the same reference repeatedly.
Review cost differences, work still to finish, changes waiting for approval, and unbilled accepted work. Pilot one type of job before applying the same cost assumptions to very different services.
7. Frequently asked questions
Is the amount left after direct costs the final profit?
Not necessarily. Overhead, tax, financing, and other business costs may still apply. Define the measure clearly and keep it separate from cash collection.
Should staff time be recorded only for hourly customer billing?
Time can also help understand delivery costs on a fixed-price job. Whether it is billable is a separate question governed by the customer agreement.
How should a customer’s extra request be handled?
Record the request, assess its cost and timing, and obtain the required agreement before treating it as an approved scope or price change.
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